Exchange-Traded Funds (ETFs)
An Exchange-Traded Fund (ETF) is a type of investment fund that is traded on a stock exchange. ETFs are similar to mutual funds in that they both hold a basket of stocks, bonds, or other assets, but ETFs are traded like stocks and can be bought and sold throughout the day. ETFs are popular because they offer investors the ability to diversify their portfolios without having to buy individual stocks or bonds. ETFs also offer investors the potential for higher returns than traditional mutual funds.
History of Exchange-Traded Funds
Exchange-traded funds have been around since the early 1990s. The first ETF was the Standard & Poor’s Depositary Receipts (SPDRs), which was launched in 1993. Since then, ETFs have become increasingly popular with investors, as they offer a low-cost way to diversify their portfolios. ETFs have also become popular with institutional investors, as they can be used to hedge against market volatility.
Comparison of ETFs and Mutual Funds
| ETFs | Mutual Funds |
|---|---|
| Traded on stock exchange | Not traded on stock exchange |
| Lower fees | Higher fees |
| More tax efficient | Less tax efficient |
| More transparent | Less transparent |
Summary
Exchange-traded funds (ETFs) are a type of investment fund that is traded on a stock exchange. ETFs are similar to mutual funds in that they both hold a basket of stocks, bonds, or other assets, but ETFs are traded like stocks and can be bought and sold throughout the day. ETFs offer investors the ability to diversify their portfolios without having to buy individual stocks or bonds, and they offer the potential for higher returns than traditional mutual funds. For more information about ETFs, investors can visit websites such as Investopedia, Morningstar, and The Balance.
See Also
- Mutual Funds
- Index Funds
- Hedge Funds
- Real Estate Investment Trusts (REITs)
- Closed-End Funds
- Exchange-Traded Notes (ETNs)
- Commodity ETFs
- Currency ETFs
- Actively Managed ETFs
- Passively Managed ETFs
